… and the Pursuit of Happiness - Institute of Economic Affairs

… and the pursuit of happiness
subjective wellbeing
two sources of comparable repeated cross-national cross-sections.
Each data set spans over two decades and covers dozens of countries.
In analysing the time-series data we can subject the hypothesis
that wellbeing depends on relative income to a test: if notions
of a good life change as the income of one’s fellow citizens grows,
then we should see only a modest relationship between growth in
satisfaction and growth in average income, relative to our pointin-time
estimates. This is because the general growth in income
does not make people feel better. However, we present economically
and statistically significant evidence of a positive relationship
between economic growth and rising satisfaction over time,
although limited data mean that these estimates are less precise
than our other findings.
Finally, we turn to alternative measures of subjective wellbeing,
showing that they too rise with a country’s income. We
find that happiness is positively related to per capita GDP across
a sample of 69 countries. We then show that additional, effectspecific
measures of subjective wellbeing, such as whether an individual
felt enjoyment or love, or did not feel pain, are all higher in
countries with higher per capita GDP. Our finding that sub jective
wellbeing rises with income is therefore not confined to an
unusual data set or a particular indicator of subjective wellbeing.
Background on subjective wellbeing
Subjective wellbeing has many facets. Some surveys, such as the
World Values Survey, ask respondents about their life satisfaction,
asking, ‘All things considered, how satisfied are you with
your life these days?’ The Gallup World Poll includes a variant of
this question in which respondents were shown a picture and told
‘Here is a ladder representing the “ladder of life.” Let’s suppose the
top of the ladder represents the best possible life for you; and the
bottom, the worst possible life for you. On which step [between
0 and 10] of the ladder do you feel you personally stand at the
present time?’ This question, which we refer to as the satisfaction
ladder, is a form of Cantril’s ‘Self-Anchoring Striving Scale’
(Cantril, 1965). Other surveys ask about happiness directly. Gallup
also asks a battery of more specific questions, ranging from ‘Were
you proud of something you did yesterday?’ to ‘Did you experience
a lot of pain yesterday?’ Whereas the satisfaction question invites
subjects to assess the entirety of their wellbeing, the more specific
questions measure feelings rather than assessments (Diener,
2006). In this chapter, we largely focus on life satisfaction.
We do this for two reasons. First, we would like to use as many
data sets as possible to assess the relationship between subjective
wellbeing and income. It is the case that income and life satisfaction
and the satisfaction ladder are more commonly measured
than any other measure. Secondly, the previous literature documenting
the Easterlin paradox (including Easterlin 1974, 1995,
2005a, 2005b, 2009) has largely focused on life-satisfaction questions
(even though researchers have tended to label these analyses
of ‘happiness’). As noted above, we do then look at other measures
of wellbeing and find the results are similar to the income–satisfaction
link.
Subjective wellbeing data are useful only if the questions
succeed in measuring what they intend to measure. Economists
have traditionally been sceptical of subjective data because they
lack any objective anchor and because some types of subject ive
data suffer from severe biases (e.g. Diamond and Hausman,
1994). These objections apply to subjective wellbeing data, but a
62 63